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Tony Blair Warns of 'Fragile' Europe, Harsh Austerity

Wednesday, 1 May 2013 | 7:45 AM ET
Tony Blair on Impact of Austerity
Tuesday, 30 Apr 2013 | 3:25 PM ET
Former British Prime Minister Tony Blair speaks to CNBC's Maria Bartiromo about whether Europe is out of the woods on its debt crisis, and the impact of austerity on the economy.

As labor movement protests take place across Europe to mark the May Day public holiday, former U.K. prime minister Tony Blair warned that the situation in Europe is "very fragile."

"The problem in Europe right now is as much political as it is economic. Countries are trying to go through this incredibly difficult period of change and you've got very low or no growth and very high unemployment. For countries to try and make change now is a big political pressure," Blair told CNBC on Tuesday.

"There is a lot of pressure on society and on politics—there are a lot of strange splinter parties growing up," he added.

(Read More: Don't Underestimate Germany's New Anti-Euro Party)

Blair's comments come after the news that euro zone unemployment reached a record 12.1 percent in March. The debate over austerity versus growth policies continues, with Italy's new prime minister saying in his maiden speech that he expected the European Union to do more to promote growth.

(Read More: Italy Will Die From Austerity Alone: Prime Minister)

Blair told CNBC that austerity had to be "calibrated" so that deficits do not become worse and cause "a downward spiral." He added that it was important to balance monetary policies with fiscal plans that allow economies to grow.

"The only thing I think that works is a kind of grand bargain that deals not only with the liquidity issue, but the solvency and the growth issues as well. … If you simply offer people austerity and no reform, you are going to have a big problem," he said.

(Read More: Are You an Austerian or a Spendanigan?)

Blair's former party, currently in opposition, is struggling to get its economic policies in order. Labour Party leader Ed Miliband struggled in a prominent BBC interview on Monday to articulate his economic vision and refused to admit his plan for lowering the U.K.'s sales tax would require extra borrowing.

Public uncertainty over Labour has translated into a drop in popularity, with a recent poll showing the party only just ahead of UKIP, the anti-European U.K. Independence Party.

(Read More: After Record Highs,Sell in May Could Be Right Option)

Labor Day, or May Day as it's known in the U.K., has become synonymous with labor movements across Europe. Strikes, protests, trade union marches and demonstrations are common.

In the U.K., however, since the dismantling of the trade unions by Margaret Thatcher, trade unions have diminished in size and power. When Blair came to power in 1997, he said he would not tolerate a return to the union abuses of the 1970s and invited the unions to modernize. As it turned out, his relationship with the unions became strained during his tenure with the latter feeling sidelined by "New Labour."

(Read More: Cherie Blair: Men Still Adjusting to Powerful Women)

(Read More: Cherie Blair: Thatcher Taught Tony How to Win)

By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

Contact Europe: Economy

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